Micro-economic reform measures have led to restructuring of the electricity industry over recent years and this has affected the comparability of electricity industry statistics over time. In general, gross performance measures such as sales, turnover and total expenses have been affected much more than net performance measures such as value added or profits. Special articles discussing issues associated with the reform process and the effect on statistical series appeared in the 1997-98 and 1999-2000 issues of Electricity, Gas, Water and Sewerage Industries, Australia (cat. no. 8208.0).

MANAGEMENT UNIT PERFORMANCE MEASURES

Restructuring of the electricity industry has been proceeding for some time with varied effects on the statistics as illustrated by the graph of selected indicators. Most notably, turnover has increased significantly over the past year as restructuring continues.Industry structural changes have involved the separation and sale by some businesses of their retail functions. Some consolidation of interstate retailer and multi-energy retailer businesses has also occurred.

The variables relating to profit remain relatively unaffected as an increase in income through the growth in sales of electricity, transmission or distribution income, is offset by increases in expense items such as purchases of electricity, transmission and distribution expenses, and payments for contract, subcontract and commission work.

Nationally, the number of management units classified to the electricity industry grew from 87 in 1999-2000 to 94 in 2000-01. Small increases in numbers occurred in New South Wales, Victoria and Queensland.

SUMMARY OF OPERATIONS

1998-99

1999-00

2000-01

Management units at 30 June (no.)

86

87

94

Employment at 30 June (no.)

33,022

32,884

33,435

Wages and salaries ($m)

2,025.9

2,085.2

2,305.9

Sales of goods and services ($m)

23,029.6

23,919.2

25,438.5

Turnover ($m)

24,426.9

25,476.5

27,448.3

Industry value added ($m)

9,764.6

9,577.5

10,294.2

Net capital expenditure ($m)

2,508.1

3,361.0

3,368.6

Employment, wages and salaries

Employment and wages and salaries continue to be affected by the changes caused by industry restructuring.

Employment increased by 551 persons (2%) to 33,435 persons in 2000-01. Victoria reported the largest rise, an increase of 461 persons (9%) to 5,731 persons.

At 30 June 2001, New South Wales employed the largest share of the electricity industry's work force accounting for 34% (11,512 persons) of the total employed. Queensland had the second largest number of persons employed accounting for 24% of the national total.

Wages and salaries paid increased by $221m (11%) to $2.3b in 2000-01.

Income and expenditure

Turnover in the electricity supply industry increased nationally by $2.0b (8%) to $27.4b. The majority of this increase was accounted for by a growth in the value of sales of goods and services of $1.5b (6%) to $25.4b although much of the increase was due to the statistical effects of restructuring rather than real growth. Most of this increase can be attributed to New South Wales, Victoria and Queensland. Sales of goods and services for South Australia decreased by $258m (10%) because of the transfer of some sales functions to Victoria.

In 2000-01 purchases and selected expenses increased nationally by $1.1b (7%) to $17.3b. The major contributors to this increase were rises in the value of purchases of goods and materials which is partially attributable to industry restructuring and the recording of transactions that were previously internal to companies.

Trading profit increased by $714m (8%) to $9.4b in 2000-01. Operating profit before tax (OPBT), however, decreased by $520m (18%) to $2.4b with the level of OPBT being affected by decreases in interest income and increases in interest expenses, and wages and salaries. Interest expenses increased nationally by $531m (20%) due, in part, to the continuing privatisation of units in the electricity industry. The effects of interest expenses on OPBT are most prominent in Victoria and South Australia. While Victoria had comparable earnings before interest and tax (EBIT) with New South Wales, its OPBT was 98% lower because its interest payment for 1999-2000 and 2000-01 was more than double that for New South Wales. In both these years, the interest expenses for Victoria accounted for more than 40% of the total interest expenses incurred nationally. In South Australia, the fall in OPBT by 102% ($231m) was mainly due to an increase in interest expenses of 101% ($219m).

Industry value added increased by $717m (8%) to $10.3b in 2000-01.

Assets and liabilities

Restructuring continues to affect the level of industry assets and liabilities at both state and national levels. Over the past several years there have been variations in the way assets have been valued, changes to the level of business liability, company takeovers and restructuring, and the sales of a number of electricity assets. Furthermore, businesses which have recently entered the electricity supply industry have brought in their own assets and liabilities, contributing to an increase in both items. There has also been a movement of assets between the electricity and gas industries, as businesses diversify their energy interests through the acquisition of assets in both industries.

In 2000-01 the total value of assets nationally increased by $2.5b (3%) to $86b, with non-current assets accounting for $2.1b of this increase. Some of the variation between current and non-current assets is attributable to industry restructuring, with a resultant reclassification of assets from current to non-current.

Total liabilities increased by $6.1b (11%) to $59.2b with current liabilities increasing by $1.4b (14%) to $11.5b and non-current liabilities rising by $4.7b (11%) to $47.7b. These changes have resulted in a decrease in net worth, which fell $3.6b (12%) to $26.8b. The fall was mainly attributable to declines in New South Wales ($969m), Victoria ($951m) and Queensland ($1,709m).

Net capital expenditure

Net capital expenditure for the electricity industry in 2000-01 remained steady at $3.4b. Capital expenditure on plant, machinery and equipment decreased by $310m (14%) to $1.8b. The main contributor to this decrease in expenditure was Queensland where a fall of $352m (46%) was recorded.

Performance measures

A range of performance measures can be produced from the data available from profit and loss statements and balance sheets of businesses. This publication presents only a selection of these for the electricity industry. While these are a very useful way of presenting summaries of performance, users of these statistics should note the limitations referred to in paragraphs 14-20 of the Explanatory Notes before making any judgements based on these results. In addition, the restructuring of the industry affects some comparisons.

Some of the main features for performance measures in the electricity industry in 2000-01 were:

trading profit margin 37.0% (36.3% in 1999-2000);

return on funds 7.5% (7.6% in 1999-2000);

liquidity ratio remained steady at 0.7 times;

debts to assets 68.8% (63.6% in 1999-2000); and

acquisitions to disposals ratio 22.1 times (9.6 times in 1999-2000).

GAS INDUSTRY

INTRODUCTION

Statistics about the gas industry are presented in this section. The comparability of gas industry statistics over time has been affected by the restructuring of this industry over recent years. In general, gross performance measures such as sales, turnover and total expenses have been affected much more than net performance measures such as value added or profits. Special articles discussing issues associated with the reform process and the effect on statistical series appeared in the 1997-98 and 1999-2000 issues of Electricity, Gas, Water and Sewerage Industries, Australia (cat. no. 8208.0).

MANAGEMENT UNIT PERFORMANCE MEASURES

The current environment within the gas industry reflects the results of several years of restructuring beginning in the early 1990s. The formation of separate businesses to undertake transmission, distribution and other activities to replace vertically integrated businesses has resulted in the recording of transactions between transmitters, distributors and other specialist businesses. Such transactions were not recorded in the vertically integrated businesses. The effect on the statistics has been to substantially increase the value of ‘gross’ variables such as turnover and total expenses (and their component items) but to have a much lesser effect on ‘net’ variables such as industry value added (IVA), operating profit before tax (OPBT) and earnings before interest and tax (EBIT). In general, changes to these net variables reflect improved efficiencies in the industry rather than changed industry structures.

Analysis of selected variables from 1996-97 to 2000-01 highlights the effects of restructuring. Initially as state-owned utilities were sold off, and new gas suppliers entered the market, the increased separation of distribution, transmission and retail sales activities resulted in turnover increasing significantly. This was primarily because each of these units was now selling gas or earning service income or transmission income. Previously, the costs of transmission and distribution were internal costs borne by state-owned public utilities. Over time units have gradually rationalised their operations. This has resulted in several businesses widening their networks through corporate takeovers, while a number of individual companies have restructured their operations to the point where activities not previously undertaken by gas businesses are now being included, as well as activities previously undertaken by gas businesses now being undertaken by non-gas businesses.

The flattening out of the indicators in 2000-01 is partially attributable to business units that were previously part of the gas industry moving to industries out of scope of this collection including some to the electricity industry as a result of company takeovers and restructuring.

The following graph shows changes in selected variables over the period 1996-97 to 2000-01 and in particular the initial substantial increases in turnover and to a lesser extent EBIT and OPBT. While the graph includes the effects of businesses incorporating non-gas activities into their operations, the primary changes are due to the disaggregation of functions across the industry. The lower EBIT and OPBT in 1996-97 was because of a one-off payment by the then Gas and Fuel Corporation of Victoria, as a settlement of a dispute with Bass Strait producers Esso/BHPP over Petroleum Resource Rent Tax.

The number of management units in the gas supply industry increased from 15 in 1999-2000 to 19 in 2000-01.

SUMMARY OF OPERATIONS

1998-99

1999-00

2000-01

Management units at 30 June (no.)

18

15

19

Employment at 30 June (no.)

3,073

2,877

2,710

Wages and salaries ($m)

182.5

151.4

164.3

Sales of goods and services ($m)

5,030.6

4,886.4

5,003.2

Turnover ($m)

5,105.5

4,965.3

5,066.6

Industry value added ($m)

1,404.1

1,304.1

1,047.4

Net capital expenditure ($m)

159.7

173.2

102.2

Employment, wages and salaries

Employment decreased by 167 persons (6%) to 2,710 persons in 2000-01. This decrease was principally caused by internal restructuring of businesses. Wages and salaries however, increased by $13m (9%) to $164m in 2000-01.

Income and expenditure

In 2000-01 sales of goods and services in the gas supply industry rose slightly by $117m (2%) from $4.9b to $5.0b. Restructuring has resulted in an increase in some expense items. Purchases increased by $283m (16%) to $2.1b while payments for contract, subcontract and commission expenses increased by $59m (10%) to $665m in 2000-01.

The effects of the structural changes, particularly as they relate to the movement of business units between sectors has had a dampening effect on several of the selected indicators. Trading profit decreased by $244m (19%) to $1.0b while EBIT decreased by $230m (23%) to $771m in 2000-01. OPBT decreased by $187m (22%) to $656m.

Assets and liabilities

Restructuring continues to cause changes to the levels of industry assets and liabilities because of variations in the way assets have been valued, changes to the level of business liability and the sales of a number of assets. Furthermore, new businesses entering the Australian gas supply industry are including their own assets and liabilities which has contributed to fluctuations in both items. The inclusion of activity that was previously classified to wholesaling has also affected the level of assets and liabilities. In addition several business units have been taken over by businesses that are classified to other industries, notably electricity. This has resulted in the assets and liabilities for these gas businesses now being included within the management unit details for the electricity industry.

In 2000-01 the value of current assets decreased by $199m (16%) to $1.0b while current liabilities decreased by $58m (4%) to $1.6b. Non-current assets decreased by $1.3b (28%) to $3.4b. Non-current liabilities decreased by $1.4b (53%) to $1.2b in 2000-01. As a result, net worth remained steady at $1.6b during the reference period.

Net capital expenditure

In 2000-01 net capital expenditure decreased by $71m (41%) to $102m. The main reason for this was the movement of units to industries out of the scope of the collection.

Capital expenditure on plant, machinery and equipment increased by $7m (8%) to $90m. Capital expenditure on dwellings, buildings and other structures fell by $82m (90%) to $9m in 2000-01.

Performance measures

Selected performance measures are presented below. However, readers should note that restructuring would have affected these measures and that some caution is required when using them (see paragraphs 14-20 of the Explanatory Notes).

Some of the main features for performance measures in the gas industry in 2000-01 were:

trading profit margin 20.7% (26.2% in 1999-2000);

return on funds 26.9% (23.2% in 1999-2000);

liquidity ratio 0.6 (0.7 times in 1999-2000);

debts to assets 63.5% (72.2% in 1999-2000); and

acquisitions to disposals 32.9 times (124.7 times in 1999-2000).

WATER AND SEWERAGE INDUSTRY

INTRODUCTION

This section of the publication presents statistics about the water and sewerage industry. Both private and government units are included in the population of the survey.

In a manner similar to the electricity and gas industries, the water and sewerage industries continue to experience the effects of reform. A special article discussing issues associated with the reform process appeared in the 1997-98 issue of Electricity, Gas, Water and Sewerage Industries, Australia (cat. no. 8208.0).

MANAGEMENT UNIT PERFORMANCE MEASURES

This chapter presents management unit data for the water supply and sewerage and drainage services industries.

Employment, wages and salaries

Employment and wages and salaries continue to be affected by the changes caused by industry restructuring. Employment increased by 1,252 (7%) to 18,180 persons at 30 June 2001. Wages and salaries paid increased by $9m (1%) to $828m in 2000-01. Selected labour costs which includes wages and salaries, superannuation and worker's compensation were $952m in this period, an increase of $50m (6%).

Income and expenditure

Turnover in 2000-01 increased by 11% to $7.4b, with sales of goods and services accounting for $6.6b. This increase can be attributed to increased water usage sales reflecting the drier weather as well as increases in service charges. Trading profit was $3.6b, an increase of 6% from 1999-2000 with the value of purchases and selected expenses being $3.3b. Earnings before interest and tax was $2.7b, 1.7% higher than in 1999-2000 while operating profit before tax was $2.0b, an increase of 4.7%. Industry value added was $4.2b for the reference period. This was an increase of 6% on 1999-2000.

Assets and liabilities

The total value of assets in the water and sewerage industries remained steady at $60.5b in 2000-01. The total value of liabilities decreased by 11% to $12.5b. This resulted in a 3% increase in total net worth, to $48.1b in 2000-01.

Net capital expenditure

The value of acquisitions of assets in 2000-01 was $1.5b, a decrease of 25% from the previous year's figure of $2.0b. Net capital expenditure for the reference period decreased by 25% to $1.4b.